Local authority landlord — Lease of business premises by landlords’ predecessor — Option in lease to renew for 21 years — Application for declaration that option validly exercised — High Court holding that council had no power grant option — Grant of option ultra vires.
The defendant council were the successors in title to the original landlord which granted a lease to the plaintiff for a term of one year from September 29 1969 at a peppercorn rent and thereafter a term of 21 years to expire on or about September 29 1991. The premises consisted of approximately 1.9 acres forming part of Poundbury West Camp Estate (Light Industrial Section), Poundbury Road, Dorchester. The plaintiff sublet part of the premises for terms extending beyond the term created by the lease. Clause 5(1) of the lease provided that on exercise of an option by the plaintiff, the defendants would let the premises for a further 21-year term at a rent to be determined by clause 5(2).
The plaintiff purported to exercise the option by solicitor’s letters of October 2 and 4 1990, receipt of which the defendants acknowledged by letter of November 2 1990. The plaintiff issued a summons claiming a declaration that he had validly exercised the option. The questions at issue were: (1) whether a purported grant of an option was ultra vires the council’s powers; and (2) whether a failure to repair on the plaintiff’s part rendered any notice under clause 5(1) invalid.
Held The summons was dismissed.
1. The purported grant by a local authority of an option to purchase the reversion upon a lease was ultra vires and invalid: see Trustees of the Chippenham Golf Club v North Wiltshire District Council (1991) 64 P&CR 527.
2. The same principle applied to an option to renew a lease: see West Middlesex Golf Club Ltd v London Borough of Ealing (1993) 68 P&CR 461.
3. Section 164 of the Local Government Act 1933 provided that a local authority might let land which they possessed with the consent of the minister for a term exceeding seven years. Section 165 empowered a local authority to sell any land which was not required for the purpose for which it was acquired. However, neither sections 164 nor 165 conferred on a local authority the power when granting a lease to include in the sale an option to further the lease.
4. Section 172 conferred on a council powers to dispose of corporate land, ie land belonging to or held in trust for a municipal corporation. However, the wording did not include an option to renew a lease. Moreover, section 172(2) was not intended to empower option to renew rather it was intended to preserve existing powers already granted. Therefore it had no application in this case.
5. Therefore, the purported option contained in clause 5(1) of the lease was void as being ultra vires the defendants’ predecessors in title under the Local Government Act 1933.
6. The effect in law of granting a sublease for a term longer than the term lease itself was that the sublease took effect as an assignment: see Grosvenor Estate Belgravia v Cochran [1991] 2 EGLR 83.
7. The effect of assigning part of the demised premises away from the plaintiff was that the option in clause 5(1) ceased to be exercisable.
8. However it could not be asserted that the notice was not validly served under clause 5(1) because of the plaintiff’s failure to repair. The plaintiff was not deprived of his right to exercise the option by minor breaches of that covenant. If the matter had rested solely on that question the court would have held the notice validly served.
Peter Birts QC (instructed by Berrymans, of Southampton) appeared for the plaintiff; Kirk Reynolds QC (instructed by Sharpe Pritchard, London agents for West Dorset District Council) appeared for the defendant council.
